ALGERIA

Photo by: Christian Lebon

Democratic and Popular Republic of Algeria

Al-Jumhuriyah al Jaza'iriyah

ad-Dimuqratiyah ash-Sha'biyah

COUNTRY OVERVIEW

LOCATION AND SIZE.

Algeria is located in North Africa, bordering the Mediterranean Sea. It
shares borders with Morocco, Mauritania, Mali, Niger, Libya, and
Tunisia. Taken together, Algeria, Morocco, and Tunisia form what is
known as the Arab Maghreb or West. With an area of 2,381,740 square
kilometers (919,595 square miles) and a short coastline of 998
kilometers (620 miles), Algeria is the second largest country in Africa
after Sudan, and is slightly less than 3.5 times the size of Texas.
Algeria's capital city, Algiers, is located in the north on the
Mediterranean Sea. Other major cities include Annaba and Oran, both in
the north.

POPULATION.

The population of Algeria was estimated at 31,193,917 in July of 2000,
an increase of 6.2 million from the 1990 population of 25,010,000. In
2000, Algeria's birth rate stood at 23.14 per 1,000, while the
death rate was reported at 5.3 per 1,000. With a projected growth rate
of 1.7 percent between 2000 and 2015, the population is expected to
reach 39.8 million by the year 2015. Muslims, mostly of the Malekite
Sunni tradition, make up 99 percent of the population, while Christians
and Jews make up the remaining 1 percent. A small percentage of the
population are the indigenous Berbers, who speak Tamazight. Since 1995,
the Berbers have been given wider autonomy and have been allowed to
speak and teach their language. Arabic is the official and dominant
language.

Algeria's population growth has slowed significantly since the
early 1990s, reaching 2.8 percent in 1998, down from 3.06 percent in
1987. The slowdown is mostly attributable to a falling birth rate, which
is now 2.15 children per family. Population growth is expected to drop
even further in the coming years. The success of the Algerian
government's family planning policies has ensured wider access to
contraceptives and family planning education. The Comite national de la
population (CNP) was established in October 1997 to oversee and
coordinate national planning policies.

The population is generally young, with some 35 percent below the age of
14 and just 4 percent older than 65. Given the population makeup and the
significant drop in the population growth rate, the government is faced
with the daunting challenge of creating new employment opportunities,
and is bracing itself for an aging population in the coming decades.
Algeria's young population has also been a source of political
instability, feeding an anti-government Islamic backlash that began in
the early 1990s. Unemployment and limited job opportunities are largely
responsible for an Islamic insurgency that has destabilized the country
since 1991.

As in many developing countries, a majority of Algerians live in urban
areas. In 1997, 60 percent of the population was urban, an increase of
29 percent from 1966, but the trend toward rural-urban migration is
believed to have leveled off. Most of the population is

concentrated in the north, with the capital Algiers and its suburbs
being home to the largest concentration of Algerians; 4 million people
live in the capital.

FISHERIES.

Though Algeria's location would suggest that the country would
have a booming fishing industry, actual fishing production remains low,
largely due to under-exploitation. Since the late 1990s, the government
has embarked on a modernization program to increase the productivity of
the sector, but most fishing activity continues to center around small
boats and family-owned businesses. The government has also been trying
to attract foreign investment in this sector, in the year 2000 granting
some 20 Japanese fishing boats the right to fish in Algerian waters.
This agreement was based on a provision that the catch does not exceed
750,000 metric tons of red tuna a year.

INDUSTRY

MINING.

Hydrocarbons, mainly oil and gas, are the country's main exports.
Algeria's oil and gas reserves rank 14th and 5th largest in the
world, respectively. During the 1970s, Algeria was a large producer of
oil, but has since lost that status as oil was replaced by gas
production as the country's main source of export revenue. Oil,
first produced in commercial quantities in the late 1950s, accounted for
73 percent of Algeria's hydrocarbon productions in 1980, but now
accounts for about 20 percent. France, Spain, Belgium, Turkey, and the
United States are the main consumers of Algeria's oil, and plans
are underway to expand export activities, mainly to Europe. Although
most restrictions on oil exports were removed in the 1990s and the
government no longer subsidizes the sector, the state-owned company
Sonatrach continues to retain full control over its activities.

The oil sector opened to foreign investment in 1991. As a result,
foreign companies are now allowed to invest and even buy existing
oilfields, and despite the high political risk associated with these
investments, several foreign companies operate in the country in 2001. A
total of 18 foreign companies operate in the oil sector, bringing in
around US$1.5 billion in investments. Natural gas production began in
1961, and in 2000 represented 57 percent of total proven hydrocarbon
reserves. Algeria is the second-largest exporter of liquid natural gas
in the world after Indonesia. The bulk of Algeria's gas is
exported to Europe through 2 major pipelines that run through Tunisia
and Morocco. Since the late 1990s, the government has been engaged in
efforts to upgrade and expand oil and liquefied natural gas exploration
by attracting foreign investments. It has also moved to increase the
production of liquefied petroleum gas as a means to diversify income
from this sector.

Algeria's non-hydrocarbon mining infrastructure remains
underdeveloped. In addition to oil and natural gas, Algeria mines gold
in the southeast Hoggar region and diamonds near the Mali borders, and
exports high-grade ore, iron pyrites, phosphates, lead, zinc, mercury,
barite, and antimony. Since the late 1990s, the government has made
progress in removing restrictions on foreign and private investment in
the non-energy mining sector in an effort to minimize the state's
control over the sector. The sand, marble, and gold sectors have
received special interest from small private investors.

MANUFACTURING.

The non-hydrocarbon manufacturing sector is a moderate though declining
contributor to the Algerian economy. According to the EIU
Country Profile
for 2000, though manufacturing accounted for 12 percent of GDP in 1993,
its contribution fell to 9 percent in 1999. The decline in
manufacturing's contribution to GDP can be attributed mainly to
the legacy of centralization and inefficiency that have characterized
the state enterprises controlling the sector. Algeria's
manufacturing industries are beset by an oversized bureaucracy and debt,
and have, as a result, lost their ability to compete with imported
finished products. The government's efforts since the 1980s to
restructure the industrial sector into smaller state-run units and
encourage
joint ventures
with the
private sector
have failed to produce the desired turnaround.

Before independence, food processing, textiles, cigarettes, and clothing
constituted the main manufacturing activities in the country. Since the
mid-1960s, a greater emphasis has been placed on heavy industry.
Historically, Algerian companies have processed petro-chemicals, steel,
metals, electronics, clothing, leather, paper, timber, chemicals, and
construction equipment. Petrochemicals are an important contributor to
GDP. Petrochemical industries include methanol, resins and plastics, and
fertilizers, and are centered in the 2 cities of Skikda and Arzew.
Production in the private sector recorded a 10-percent increase in 1999,
in contrast to the non-hydrocarbon industrial state sector, which saw a
drop in output of 1.5 percent in 1999. The pharmaceuticals, chemicals,
construction equipment, and leather industries were the leading
performers.

SERVICES

FINANCIAL SERVICES.

Financial services in Algeria are fairly outdated, and the lack of
modern services is an obstacle to the growth of the private sector and
foreign investment alike. Until 1998, the banking sector was
dominated by 3 major state-owned banks. But private banks, including
U.S. and French banks, have been allowed to operate in the country since
1998 as part of a government plan to reform the sector. A new money and
credit law was adopted in 1990, and although the Treasury purchased most
of the local banks' debt in 1994, these banks continue to suffer
from
bad loans
, mismanagement, and political interference. The Algerian stock exchange
was officially opened in 1999, also part of the government's plan
to privatize the economy.

TOURISM.

Tourism is not a major contributor to GDP, despite government efforts to
encourage the sector. Its promising potential is stifled by a lack of
investment and the endemic political violence in the country, although
the south, where some of the government's most recent projects
are located, has been spared from these problems. Potential holiday
destinations are the mountains and deserts of the interior and the
country's beaches. Although foreign tourists have since 1998
started returning to Algeria, the sector has a long way to go to full
recovery.

RETAIL.

Lacking many large commercial centers other than Algiers, Oran, and
their suburbs, Algeria has a poorly developed
retail
sector. While Algiers is home to a variety of retail stores, the
majority of towns in the interior of the country have small family-owned
shops, farmer's markets, and temporary roadside stands.